Stamford accountant who helped hedge fund fraud cuts gov. deal

Tim Loh

Updated 9:49 pm, Tuesday, November 12, 2013

A Stamford man who helped a local hedge fund fleece millions of dollars from investors but later tipped off federal agents to the illegal activity has cut a deal with the government, the Securities and Exchange Committee announced on Tuesday.

Scott Herckis, the former administrator of Heppelwhite Fund, which stole at least $1.5 million from investors, has agreed to pay about $50,000 in fees and not serve as administer to any hedge fund for five years. He is also prohibited from associating with brokers, dealers, investment advisers or registered investment companies during that time, the SEC said in a release.

The deal is the agency's first "deferred prosecution agreement" with an individual, according to the release. Such agreements are generally made with companies. The point is to help the agency identify and investigate misconduct. In return, the SEC can refrain from prosecuting cooperators for their own violations.

Former Heppelwhite Fund manager Berton M. Hochfeld, 66, of Stamford, pleaded guilty in January to one count of securities fraud and one count of wire fraud. In August, he was sentenced to two years in federal prison. U.S. prosecutors at the time said he'd inflated the firm's assets in reports to investors and secretly pulled out more than $2 million for himself -- part of which he spent on vacations and antiques.

Herckis "aided and abetted" those violations, the SEC said on Tuesday. He had served as the fund's administrator from December 2010 until he resigned in September 2012. At that point he contacted government authorities to voice his concerns about Hochfeld's conduct and discrepancies in Heppelwhite's accounting records, the SEC said.

Herckis voluntarily produced "voluminous documents" and explained to SEC agents how Hochfeld had perpetrated the fraud. Within weeks, the SEC filed an emergency action last November freezing Hepplewhite's assets. Criminal charges quickly followed.

In October, a federal court judge approved a $6 million distribution to harmed Heppelwhite investors. The $50,000 in fees Herckis had received for serving as administrator to the fund is being added to the Fair Fund that is compensating investors.

"We're committed to rewarding proactive cooperation that helps us protect investors, however the most useful cooperators often aren't innocent bystanders," said Scott W. Friestad, an associate director in the SEC's enforcement division.

"To balance these competing considerations, the (agreement) holds Herckis accountable for his misconduct but gives him significant credit for reporting the fraud and providing full cooperation without any assurances of leniency," Friestad added.